50 things to know about the ambulatory surgery center industry

1. Each year, physicians perform more than 23 million procedures in ASCs. 1

2. There are presently 5,464 Medicare-certified ASCs. There are 5,686 registered hospitals operating in the United States including nonprofit, for-profit, federal government, state and local government, psychiatric and long-term hospitals as well as hospital units in institutions. 2

3. Approximately 25 percent to 30 percent of ASCs are owned or managed by multi-facility chains. 3

4. Of the 766 ASCs owned by the largest chains, about half are headquartered by Nashville firms including AmSurg and Hospital Corporations of America. 3

5. Cigna Health and Life Insurance Co., filed a billing fraud lawsuit in federal court in an effort to recoup millions paid to 11 Indiana-based surgical centers. The centers allegedly engaged in a "fee forgiveness" model to bring in Cigna's out-of-network patients through reducing members' copays and other fees while charging Cigna inflated prices. Cigna paid the surgical centers more than $6.5 million in claims before becoming aware of the centers' "fee-forgiving" model. 5

7. The Ambulatory Surgery Center Association serves as the national membership as well as the advocacy group for ASCs. William Prentice is the executive director of ASCA. He previously served as the director of the Washington office for the American Dental Association. Mr. Prentice holds a master's degree in administration from the University of Pennsylvania as well as a law degree from Rutgers Schools of Law — Newark in New Jersey.

Terry Bohlke, CASC, is the president of the organization. Mr. Bohlke is vice president of operations for National Surgical Healthcare. Harmony Surgical Center CEO Rebecca Craig, CASC, is ASCA's vice president and David Shapiro, MD, is the immediate past president. 1

8. The first ASC was opened in 1970 in Phoenix opened by Wallace Reed, MD, and John Ford, MD in an effort to provide convenient, cost effective surgical services to local residents. Five surgeons performed cases at the center on the first day it opened, and four of those procedures required general anesthesia. 1

9. Of all the ASCs operating in the United States, approximately 20 to 25 percent have some ownership by a hospital partner.

13. AmSurg acquired Sheridan Healthcare for $2.35 billion in May 2014. AmSurg shares increased after the announcement of acquisition plan with Raymond James analyst John Ransom setting AmSurg's price target to $60 and upgrading the stock at a "buy" rating. 7

14. Surgery Partners acquired Symbion for $792 million in June 2014, increasing the company's holdings to around 100 centers across 27 states in 2014. 8

15. Surgical Care Affiliates presently operates 185 surgical facilities in 34 states. The company has more than 5,000 teammates and more than 7,500 physicians performing procedures in SCA facilities annually. 9

16. Some of the leading companies that often manage or develop ASCs that typically own a minority interest in the ASC include ASCOA, Physicians Endoscopy, Regent Surgical Health, ASD Management, Merritt Healthcare, Nueterra Healthcare, Blue Chip Surgery Center Partners, Constitution Surgery Centers and Practice Partners in Healthcare among many others.

Physicians Endoscopy owns and operates more than 35 endoscopic ASCs across the United States. Regent Surgical Health develops, manages and owns 21 ASCs, with 16 of those ASCs being joint ventures with leading hospitals. ASD Management presently has 25 surgery centers that are developed and managed in partnerships with physicians or as joint ventures with hospitals.

Merritt Healthcare presently has nine surgery centers with four more centers currently in the development stage. Nueterra Health has 77 facilities in operation throughout 27 states.

Pinnacle III has developed more than 30 surgery centers across the United States. Nobilis Health develops and manages more than 100 surgical centers. SurgCenter Development has developed more than 130 surgery centers over the last 20 years. Surgical Management Professionals currently has 20 surgical facilities across the United States and Canada.

19. Meridian Surgical Partners presently partnered with 10-physician owned ASCs across the United States. The company specializes in acquisition, development and management of spine and orthopedic-driven ambulatory surgery centers. John C. Wilson Jr. has been CEO since October 1, 2013 while additionally serving as the chief financial officer since the company's establishment in 2006. Kenneth Hancock serves as the president and chief development officer of Meridian Surgical Partners.

20. Last year, approximately 38 percent of ASC management companies reported having between one to five acquisitions, with 24 percent of the companies acquiring between six and 10 centers. A reported 29 percent did not acquire any ASCs, according to Health Appraisers "2015 Valuation Survey." 11

22. The Medicare rates are 82 percent higher in hospital outpatient departments than ASCs for 2015. CMS proposes to update OPPS rates by -0.1 percent, based on a hospital market basket increase of 2.7 percent with a -0.6 percent adjustment for multi-factor productivity and a -0.2 percent point adjustment requirement by law for the CY 2016 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System. 12

23. The volume of services per FFS beneficiary for ASCs grew by an average annual rate of 0.5 percent in 2013, as opposed to an average annual rate of 2.1 percent from 2008 though 2012. Medicare payments have increased from $3.1 billion to $3.7 billion from 2008 to 2013 Medicare payments per FFS beneficiary increased from $110 million to $112 million from 2012 to 2013, a 2 percent increase. 2

25. Approximately 96 percent of ASCs were for-profit in 2013, showing no change from the number of for-profit ASCs in 2008. 2

26. As a way to enhance patient care provided in ASCs, the Medicare Payment Advisory Commission proposed that CMS implement a value-based purchasing program, rewarding high-performing providers while penalizing low-performing providers no later than 2016. ASCs began submitting data in 2012 under the Quality Reporting Program on four patient safety indicators and one process measure. 14

27. MedPAC recommends CMS incorporates certain patient safety and outcome measures in the ASC VBP program. The value-based program would reward high-performing providers and penalize low-performing providers in an effort to improve the quality of care provided to beneficiaries in ASCs. 2

The recommended safety and outcome measures include:

Patient falls in the ASCWrong side surgery, wrong site surgery, wrong procedure, wrong implantHospital transfer or admission after an ASC procedure due to a procedure-related problemPatient burnSSIs.

28. The CMS finalized the addition of nine spine codes regarding the ASC-payable list that were implemented Jan. 1, 2015. The codes include:

29. ASCs utilize various supply chain strategies, with 34 percent of surgery centers using product standardization and an additional 24 percent of centers using GPO evaluation as a supply chain strategy, according to Provista. 13

30. Bundled payments are becoming an increasing trend for payment options in ASCs. Bundled payments are most common among orthopedic procedures and colonoscopy. They aid in cost management while providing more pricing predictability, said Hoag Orthopedic Institute Administrator Gabrielle White.

31. If only half of the eligible surgical procedures moved to ASCs from hospital outpatient departments, Medicare would save $2.5 billion a year. 1

32. Approximately 35 percent of surgical centers are located in states requiring certificate-of-need approval for new ASC developments as listed in Medicare's Provider of Services data file.

35. The five worst states in which to practice are, according to a Medscape's Best and Worst Places to Practice:

• New York• Rhode Island• Maryland• Massachusetts• Connecticut

36. The Centers for Medicare & Medicaid Services released the 2016 proposed payment rule for ASCs and HOPDs on July 1, 2015. ASCs could see an effective update of 1.1 percent and HOPDs would see an effective update of 1.9 percent. The inflation update factor is substantially different for ASCs and hospitals. While ASCs could have inflation update factor of 1.7 percent, HOPDs could have an inflation update factor of 2.7 percent if the proposed rule is finalized as drafted. 1

37. Single-specialty ASCs are not as highly valued by operators as multispeciality ASCs. When purchasing a controlling interest in a single-specialty ASC, 65 percent of ASC companies reported prevailing valuation multiples of 6.0 to 7.9 times EBITDA with 35 percent reporting lower valuation multiples ranging from 4.0 to 5.9 EBITDA. 11

38. When purchasing a controlling interest in a multispeciality ASC, 78 percent of ASC companies reported prevailing valuation multiples of 7.0 to 8.0 times EBITDA while 23 percent reported lower valuation multiples ranging from 5.0 to 6.9 times EBITDA. 11

40. Sixteen percent of physicians are very engaged in supply cost management and 39 percent reported being engaged. Only 6 percent reported not being engaged at all. 13

41. McKenzie-Willamette Center fired Kristian Ferry, MD, after he performed procedures at an ambulatory surgery center not owned by the hospital. Dr. Ferry is suing the hospital for breach of contract, interference with his medical practice, wrongful termination and defamation. The lawsuit is seeking $6 million in economic damages plus an additional $3.8 million in noneconomic damages for emotional distress and damage to Ferry's reputation.

42. New Hampshire Rep. David House proposed state legislation to place a tax on ASCs. The provision in the Medicaid Enhancement Tax would lower the tax rate by 10 percent while widening the tax on hospitals to include ASCs and ambulance services in New Hampshire.

43. ASCs must have an inspection conducted by a state official or a representative of an organization authorized by the government to ensure ASCs are meeting regulations. Accreditation bodies for ASCs include the American Association for Accreditation of Ambulatory Surgery Facilities, the Accreditation Association for Ambulatory Health Care, Healthcare Facilities Accreditation Program and the Joint Commission. 1

44. Yorkville Endoscopy in New York lost government and industry accreditation in January 2015 following comedian Joan Rivers' death. Joan Rivers suffered a heart attack during a vocal chord procedure on August 28, 2014. She died a few days later. Two physicians, Lawrence Cohen, MD, and Gwen Korovin, MD, are under scrutiny for the procedures on Rivers including a previously unplanned biopsy.

45. California has 694 ASCs, making it the leading state in terms of concentration of ASCs. It is followed by Florida with 387 ASCs and then Texas with 347 ASCs.

47. Approximately 68 percent of ASC management companies reported having equity ownership in all freestanding entities they managed. 11

48. Approximately 25 percent of ASC management companies reported having 11 to 30 ASCs under ownership. An additional 30 percent reported having 31 or more ASCs under ownership. 11

49. Ninety percent of ASC management companies reported they prefer between six and 15 physician owners for a single-specialty ASC. Eighty-nine percent of respondents prefer between 11 and 20 physician owners for a multispecialty ASC. 11

50. CMS announced a one-year grace period for claims with ICD-10 diagnostics codes that go into effect Oct. 1. This will be the third delay for ICD-10 implementation, which was initially set for October 1, 2013. 12

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